5 things you should know about loan pre-approval

Unless you keep gold bullion under your bed, you probably need to borrow money to buy your next property. How much can you spend? Enter the loan pre-approval.

A pre-approval is a conditional lending document that is a must for prospective property buyers, says Aussie’s general manager of strategy and products, David Smith. “It gives you confidence around the question of ‘how much can I afford to borrow?’” Smith says. “It’s done, it’s dusted and you can get on with finding the right property.”

Sounds good doesn’t it? Here are five more facts about pre-approvals you really need to know.

1. Pre-approvals help get things underway

If you have pre-approval it means your lender has assessed your ability to pay future borrowings up to an agreed amount. Remember that your approval is still conditional until you’ve found a suitable property – generally, you have 90 days – and the bank has completed its formal approval process, including a valuation.

2. Pre-approvals can speed things up

If you’ve got pre-approval before you go home shopping, moving to unconditional status should be quicker before settlement. “It can make the process quicker and less stressful when you do finally find somewhere you want to buy,” David said.

3. Many names, same thing

Securing pre-approved home loan funds can seem overwhelming, the finance editor of onthehouse.com.au and author of The Great Australian Dream – how to buy your first home, Peter Boehm says. “You will hear a lot of terms being bandied around – pre-approvals, conditional approvals, approvals in principle – but they are actually all the same thing,” Boehm explains.

“Indicative” borrowing figures generated by online calculators are not mortgage pre-approvals and should be used as guides only.

4. Pre-approvals help you ‘keep it real’

One of the best things about gaining pre-approval is that you know if a property is in your price range. “It really helps you with budgeting and helps you set realistic expectations around what you can afford to buy, which is particularly valuable for first-home buyers,” Smith says.

5. Less is more – apply wisely

Every time you submit a pre-approval application, it will appear on your credit history as an “enquiry”, Boehm says. “Lenders will start to ask questions if there are too many in quick succession.”

This is why your broker will help you select a suitable lender for your individual circumstances and goals, then guide you through the process one application at a time.

Did you get pre-approval before searching for your property? How did it help you to sharpen your focus? Tell us in the comments below.

About Michelle McKinnon

Michelle is the PR & Content Manager at Aussie and a self confessed foodie. She’s eaten her way through more than 40 countries and is hungry for more trips abroad! Proud to be a Sydney-sider but boasting a dual passport Michelle is keen to indulge her wanderlust and return to Spain and Italy for more flavour filled adventures.

I see pre-approval as essential when looking for the right property. Its no good looking around at real estate and getting your hopes up for something that’s out of your range. Pre-approval keeps your hands on the reins. This is a good article. thanks

Daniel Nancarrow

I would also add that having a pre-approval can be the difference between securing a property and missing out. If vendors are assessing two similar offers both subject to finance but one has a pre-approval in place and the other does not who do you think they are going to have more confidence in?

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